Finland's failed basic income trial exposes timeless welfare reform dilemma - ABC News (Australian Broadcasting Corporation)
Finland's failed basic income trial exposes timeless welfare reform dilemma
By Gigi Foster
Updated Tue at 9:02am
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Finland recently cooled on its so-called "universal basic income" experiment of replacing traditional unemployment relief with unconditional flat cheques for a sample of unemployed adults.
Contrary to what its name suggests, the trialled scheme was not "universal": a sample of already-unemployed people, not a sample of the whole population, received cheques.
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Tim Roxburgh tries to make sense of the push for a universal basic income.
What mainly set it apart from conventional unemployment relief was that receiving the cheques was not conditional on remaining unemployed. One could be engaged in any activity, or not engaged in any activity, and still receive the cheques — as long as one was unemployed when the government first started up the trial.
Rather than UBI, an apt moniker for the scheme might have been "flat-cheque 'permanent' (for the duration of the trial) support for (a sample of) the unemployed".
Rather than exploring the challenges of implementing a bona fide UBI, it's worth returning to the fundamental and timeless problem of welfare, highlighting some of the additional problems with government assistance programs that have arisen in recent times, and considering what — if not UBI — might address some of these problems.
A disincentive to work
The fundamental and timeless problem of any national welfare system is how to assist people experiencing need without giving those people — via that very gift itself — a disincentive to work. All tried-and-tested welfare programs face some flavour of this core problem.
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AUDIO: A universal basic wage? (The Money)
UBI doesn't solve this problem. If anything, UBI creates worse work disincentives than traditional targeted welfare: not only do people who really need the UBI cheques face a disincentive to work, since the cheques aren't conditional on seeking a job or any other productive activity, but people who really don't need the cheques are likely to see a work disincentive too, in the form of the massive income taxes that are required to fully fund a UBI scheme.
The cold reality is that governments need some source from which to draw money in order to perform the functions of state, which include supporting the needy. To finance its spending, a government can tax, borrow or print.
The lack of popular enthusiasm for any of these means of generating income often comes with a dreary post-modern (and often warranted) scepticism about the intentions of government officials and politicians who decide how money gets spent.
This toxic blend nurtures many reactionary contributions to current debates about how to reform government spending. The push towards UBI is one of the more idealistic of such reactionary contributions.
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VIDEO: Why the world's richest say a universal basic income is good policy (The Business)
Is UK 'universal credit' scheme the answer?
Despite its lack of practicality, it does contain a promising idea, which is the replacement of smaller payments from several highly conditional assistance programs (for example, child support, housing support, food support) that have burgeoned over time with one bigger cheque that is less conditional, in the sense of requiring fewer administrative checks on a person's circumstances. This innovation can potentially lower administrative burdens and create better welfare accessibility for needy people.
While no longer keen on UBI, Finland seems interested in this basic idea.
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VIDEO: Q&A: What is universal basic income? (ABC News)
Like the "universal credit" scheme put in place by the UK a few years ago, a reform in this direction would (again!) not be universal, but would address the growing administrative complexity that in part originally prompted the UBI trial.
The UK does still condition its "universal credit" payments on a few factors, such as requiring unemployed recipients to look for work. To make the program affordable — just as with every other long-term feasible welfare program — people who do find work have to relinquish the benefit gradually as their earned income rises.
This claw-back of benefits inevitably causes some degree of work disincentive effect, taking us full-circle back to the fundamental problem of welfare programs that neither UBI, nor any other welfare system, can fully escape.
'Work is good' narrative must start early
The best antidote to the work disincentive effects created by government assistance programs is to embed the idea that working is something to which everyone should aspire. Upholding that idea in our social narrative makes people want to work, even if their welfare check is being clawed away as their income rises.
This is no cruel Dickensian injunction. Compared to being idle, working in a developed nation today is psychologically healthy, it helps the nation prosper, and it provides people with a social role, something to do and more success in the marriage market.
PHOTO: While no longer keen on UBI, Finland seems interested in this basic idea. (Reuters: Ints Kalnins)Even Marx thought the relationship between a person and his work so crucial that he envisioned all of society mutating when that relationship weakened. Simply put, it is good for both the economy and the people in it to maintain a social stigma against long-term idleness amongst those who are physically, psychologically, and socially able to work.
Many people are not idle, and yet do not earn income — the classic example being stay-at-home parents with small children who must be cared for. The right sort of stigma does not direct its disapproval towards such people.
Nor do we want a stigma that punishes people of sound mind and body whose skills become less marketable for technological reasons outside their control, such as many of those whose jobs were largely replaced by computers back in the 1970s.
We as a society should instead encourage and subsidise the discovery of other productive skills, re-training, and return to work (whether paid or unpaid) for these people as soon as reasonably practical.
If we are going to play ball with welfare reform, we would be wise to start with a template more akin to "universal credit" than to UBI — while promoting in the narratives at schools, in government communications, and within families the idea that working is a healthy and positive activity for ourselves and for the nation.
Gigi Foster is associate professor in the school of economics at the University of New South Wales.
